Thailand Business Forecast Report Q3 2007

Publication Date	May 2007
Publisher	Business Monitor
Product Type	Report
Pages	56
ISBN Number	1744-8808
Product Code	BMI00294

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Summary

Focus On Politics

Thailand's economy expanded by the slowest pace in almost two years in Q406, when real GDP recorded a 4.2% year-on-year (y-o-y) growth rate, down from 4.7% in the previous quarter. This took full-year growth slightly above our 4.8% forecast, to 5.0%, but political turmoil and inconsistent policy decisions will weigh heavily on the country's growth prospects going forward, despite efforts by Thai authorities to rejuvenate the ailing economy. Consumer confidence was at a sixmonth low, and business sentiment hit a five-year low in March, signalling further downside risks to economic growth. However, Thai authorities have recognised the imminent dangers facing the economy, and the central bank has moved to halt its current slide by cutting interest rates as the government supplements its annual budget.

Political unrest continues as opposition to the military-backed interim government mounts, spurred on of late by the publication of the proposed new constitution. The new charter is clearly aimed at ensuring that no one person or political party enjoys the kind of unchallenged power seen under former premier Thaksin Shinawatra, but this objective is creating its own problems. Criticism of the so-called 'anti-Thaksin charter' is centred around the fact that many believe that it is taking a backward step in efforts to promote democracy, and the government now faces an uphill struggle to get it approved by September's scheduled referendum.

The Thai authorities have moved to be more proactive in their efforts to revitalise the country's slowing economy, with the Bank of Thailand slashing interest rates by 50 basis points, and the government planning additional spending to the tune of THB7bn. However, the growth outlook remains bleak and we are of the opinion that more still needs to be done, especially on the fiscal side, if any real progress is to be made in reversing the fortunes of the economy. Our view that Thailand's export sector will be unable to match last year's resilience, as global growth moderates further in H207, will also be a drag on the economy.

Business sentiment in Thailand fell to a five-year nadir this year, as a culmination of muddled policies, increased security threats and prohibitive restrictions on businesses, aimed at stemming the baht's appreciation, turned investors' outlook sour. General uncertainty looks set to remain until democracy, and with it a new government, is returned to the country. Although, with the interim government's draft constitution proving to be unpopular in the face of scathing criticism, the business environment in Thailand looks set to remain precarious this year.

Content

Executive Summary
Focus On Politics
Chapter 1: Political Outlook
- SWOT Analysis
- New Political Rating Methodology
- BMI Political Risk Ratings
- Domestic Political Outlook
- New Constitution Facing Uphill Battle
- The proposed new constitution will face an uphill struggle to be ratified in September's scheduled referendum, as it
- seeks to wrest power away from voters in efforts to ensure political power is not abused
- Table: Interim Thai Cabinet - Key Ministers (As Of April 2007)
- Foreign Policy
- Southern Violence Upsets Business Interests
- Unrest in Thailand's southern provinces has increased in 2007, weakening consumer confidence and business
- sentiment that has already been severely dampened by the political disorder and policy missteps
- that followed last September's coup
Chapter 2: Economic Outlook
- SWOT Analysis
- Economy Ratings Revisions
- An Explanation
- BMI Economic Risk Ratings
- Introduction
- Economic Activity
- Slow Year Ahead
- Thailand's economy expanded by the slowest pace in almost two years in Q406 during which time ongoing political
- turmoil (which culminated in September's military coup) and its aftermath took its toll on private and government
- consumption
- Table: GDP, Output And Population
- Monetary Policy
- BoT Enacts 50bps Rate Cut, More To Come
- Thailand's central bank is adopting a more aggressive monetary policy to deal with waning consumer confidence and
- the country's continually deteriorating economic outlook
- Table: Consumer Price Index And Interest Rates
- Fiscal Policy
- Budget Supplement To Have Limited Impact On Growth
- The supplementary THB7bn budget announced by the Thai government to kick start the country's underperforming
- economy comes as welcome news at a time when consumer and investor confidence are weak
- Table: National Government Finance (THBbn)
- External Trade
- FTA To Encourage Greater Political Stability
- A new free-trade agreement signed with Japan, Thailand's largest trading partner, will benefit both countries through
- enhanced economic ties
Chapter 3: Special Report
- A Survey of Global Housing Risk
- The US Risk
- Concerns over poor quality mortgage lending in the US precipitated global market volatility in Q107
- An Assessment of Selected Countries
- South Korea - Sub-prime Vulnerabilities Clearing
- We have considered a selection of key emerging markets to assess their vulnerability to housing credit risk
- and to highlight some major themes in the development of financial systems in general and the mortgage
- market in particular
Chapter 4: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Legal Framework
- Labour Force
- Table: Demographic Indicators (2005)
- Table: Employment Indicators
- Foreign Investment Policy
- Table: Asia FDI
- Table: Thailand FDI
- Foreign Trade Regime
- Table: Top Export Destinations
- Tax Regime
Chapter 5: Key Sectors
- Food & Drink
- Industry Forecast Scenario
- Table: Food Consumption Indicators - Historical Data & Forecasts
- Pharmaceuticals
- Market Summary
- Table: Thailand Pharmaceuticals Market Trends And Health Expenditure Forecasts